Be responsible with your money

Avoiding the debt trap

Studying at a tertiary institution after school is an important step towards your future career. You put a lot of money and effort into your studies, so if you decide to study at a private institution, make sure it is not a fly-by-night one.

The season of having fun, relaxing and spending is finally over and we are well into 2008. This is a good time to make wise decisions about your money so that you can have a good festive season at the end of the year.

New Year's resolutions are usually difficult to keep, but there is one that you must keep - being responsible with your money. This is even more important to young people who have just finished school and have started a job this year.

Discipline

While young people are often excited about earning their own money and spending it without their parents' approval, the Credit Information Ombudsman warns that they should be disciplined and careful how they spend it. 

Spokesperson for the Ombudsman's office, Caroline Buthelezi, advises first time employees to find information on financial management and start adulthood on a good financial footing. She especially warned them against falling into the debt trap as this could lead to them being blacklisted.

First salary

Your first salary should help you achieve lifelong financial independence rather than getting you caught up in debt that you can't pay back.

One acceptable form of debt is a home loan. Buying a house is an investment and very few people can afford to buy a house without a loan. Most other loans like buying on credit, costs a lot of money. You pay interest on credit and most of the things you buy lose their value; be it a car, clothes, furniture or appliances. 

– Ndivhuwo Khangale

• Repay debt - if you have any debt like a student loan, pay it off as soon as possible. If you can afford it, pay more or double the instalment.
• Budget - learn to live on a reasonable monthly budget. Find ways to keep expenses down.
• Establish a good credit record - pay your instalments on time and in full every month. If you have trouble, consult the credit giver.
• Don't spend more than you earn.
• Salary increase won't fix things - when people get more money, they spend more and get back to where they started.
• Save at least 10 to 15 per cent of your salary every month.
• Expect to be offered credit - if your bank offers you a credit card, avoid it - it is one of the worst debts you can have.

If you already have financial problems, contact the office of the Credit Information Ombudsman for advice on 086 166 2837 or www.creditombud.org.za or Ombud@creditombud.org.za